Final answer:
An effective price floor for rice leads to a decrease in the quantity of rice demanded because it sets a legal minimum price that is above the market equilibrium, causing a surplus
Step-by-step explanation:
An effective price floor for rice is a situation where the government sets a legal minimum price for rice that is above the market equilibrium price. The correct answer to what this causes is c) a decrease in the quantity of rice demanded. When a price floor is set above the equilibrium price, quantity supplied will exceed quantity demanded, leading to a surplus of rice as producers are willing to supply more rice at the higher price, but consumers are not willing to purchase as much at that price.
Additionally, since price floors lead to an excess supply, they do not cause shortages; that is a result of price ceilings, which set a legal maximum price below equilibrium. Therefore, option b) a long-run shortage of rice is incorrect. Also, a price floor would not cause the supply curve to shift to the right, which is option d), nor would it cause the price of rice to fall, which is option e).